"The history of Eureka lies in its future." - Lambert Molinelli, 1878

DISCLOSURE

The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO), McEwen Ming (MUX) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Tuesday, August 31, 2010

Eric Rides the Rails - Gold Scares $1250



Morning Miners!

It is 5:55 AM. Ruby Tuesday rustled up the ole Colonel in the wee hours this morning to tell me some exciting news. Grab a cup and let's see what's up. When she dropped a load off at Barrick's Ruby Hill mine yesterday she ran into Eric Pastorino. Eric had just returned from a little V-time in Colorado and showed her today's headline photo that he took of the Durango & Silverton narrow gauge locomotive crossing the Animas River.

Eric rode this beauty from Silverton to Durango on the 22nd of this month and back to Durango on the 23rd. He told Ruby, "I got to ride in the wood car, my shirt pockets filled with cinders and I have burn holes in my hat and shirt!"

This story has a real connection to Eureka on many levels. You may remember last August that the Durango & Silverton Narrow Gauge Railroad featured the Eureka & Palisades #4 locomotive at their 11th-Annual Railfest event (August 13 - 16, 2009). The E&P Railroad connected Eureka to Palisades until it was discontinued in 1938 . Several years ago, Eric Pastorino and other dedicated Eurekans laid track at the County fairgrounds for the E&P's return to Eureka.

Here is a link to the Durango & Silverton museum:

The Durango & Silverton Narrow Gauge Railroad and Museum

Last year I found a fun video of the E&P on YouTube if you want to enjoy the sights and sounds of old time rail travel:

Eureka & Palisades Runby

You can read more about the E&P in the Report: Ruby Hill Pours One Million, E&P Railroad News, 8/3/2009

I've included some information from that article below the sign-off (Note 1). A big thanks to railroad fan Eric Pastorino for a great picture, story and keeping a little Eureka history alive!

Then and Now

When I reread last year's choo-choo blog, I couldn't help but compare markets then and now. This morning COMEX gold scared $1250/oz peaking at $1249.4/oz before dropping a tad to 1247.9/oz. In the early morning trading of last August's blog, COMEX gold was a lowly $960.5/oz; silver, $14.355/oz. Except for the precious metals and copper many things are not too different, here's a sample:

S&P 500 1000.92 (morning, 8/3/09) 1053.07 (today)

NYMEX oil $71.69/bbl (morning, 8/3/09) $74.69 (today)
COMEX copper $2.7320 (morning, 8/3/09) $3.3900 (today)
Western Moly Oxide $15.00 (morning, 8/3/09) $15.50(today)

Freeport-McMoRan (FCX) $64.83 (morning, 8/3/09) $72.05 (today)
General Moly (GMO) $2.92 (morning, 8/3/09) $2.95 (today)

Just something to ponder buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) remains above-par at 132.23 slipping a bit from yesterday's 135.92 but a long way from the 6/7/10 low of 50.7. Today's number remains promising but we now need to pass resistance levels of 139.53 and then 151.54 to break the recent trend reversal to the downside. Remember an EMI greater than 100 is good times (or at least better times) for this sector.

Eureka Outlook Dashboard

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is above 25; metals & miners are still on shaky timber, bellwether Freeport-McMoRan (FCX) has returned to the low-$70s but is still below its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The YELLOW light is turned back on for Investor Confidence as the bond markets still signal trouble ahead

The GREEN light is turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.32 in early trading to $74.38 (October contract, most active); Gold is up $8.7 to $1247.9 (December contract, most active); Silver is up $0.191 to $19.265 (December contract, most active); Copper is down $0.0395 to $3.3900 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $16.00; LME moly 3-month seller's contract is $16.67, LME cash seller is $16.44

Stock Market Morning Update

The DOW is up 40.71 points to 10050.44; the S&P 500 is up 4.15 to 1053.07 Miners are mixed:

Barrick (ABX) $47.10 up 1.64%
Newmont (NEM) $61.42 up 2.50%
US Gold (UXG) $5.12 up 3.54%
General Moly (Eureka Moly, LLC) (GMO) $2.95 down 0.34%
Thompson Creek (TC) $8.55 up 0.59%
Freeport-McMoRan (FCX) $72.05 up 2.40% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are mixed (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $29.02 up 1.22% - global steel producer
POSCO (PKX) $101.56 down 0.54% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.27% to $1,370,863.94 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photo by Eric Pastorino, 8/22/2010

Note 1: Dan & Ditty Markoff from Las Vegas lovingly restored the historic Eureka & Palisades locomotive. Here is an overview of their efforts:

Eureka & Palisades Locomotive #4

Finally, the following taken from the R. L. Polk & Co.'s Nevada State Gazetteer and Business Directory (First Edition, 1907-1908), is an interesting account of Eureka's little locomotive that could:

"The town of Eureka is situated 84 miles from Palisade in a canyon at the south end of Diamond Valley. It is connected with the Southern Pacific RR by the Eureka & Palisade Railroad, and is the trading center for the outlying districts and ranches within a radius of from 25 to 75 miles.

The Eureka & Palisade Railroad is depended upon to carry the entire product of the mines to Palisade, where the ore is transferred to the Southern Pacific and taken to Salt Lake. The equipment of the E & P Railroad is being increased rapidly, two new locomotives and several cars having been added this spring. Ore and coal bunkers and other necessary accommodations have been constructed. The Western Pacific Railroad will also cross the county from east to west. With this increase in shipping facilities, and the material decrease in freight rates due to recent legislation, transportation of ore no longer presents a serious problem." (USGenWeb Project)

Monday, August 30, 2010

Eureka Miner Weekly Roundup - New Features


Morning Miners!

It is 5:57 AM. Have a cup of Monday got-here-too-quick java and let's get to work. The Report is introducing a few new features this morning. As part of our Monday weekly market roundup, we've added a correlation watch for oil and copper versus gold together with the molybdenum market update and last week's chart for the Eureka Miner's Index (EMI). While we wait for the broader markets to open let's take another trip back in time to the Homestake Mine (a continuing series, Ruby Hill & Homestake Mining Memories)...

Square Set Timbering

In 1860 a clever solution to new mining problem was tried in California's famous Comstock Lode. In the deep Ophir mine traditional "post & cap" timbering could not support the enormous weight of the ore which was composed of very rich but friable quartz and clay. The Ophir mine management hired Philip Deidesheimer to develop a stronger and more easily expandable approach.

Mr. Deidesheimer came up with "square set" timbering which caught on quickly throughout the Comstock and elsewhere. Today's headline photo is a terrific example of a square set system at the 700 foot level of the Homestake Mine in Lead, South Dakota. Each set resembles the corner of a cube and is composed of three timbers: a vertical post, and a horizontal cap and girt. Additional sections and levels can easily be added starting at the cube corner of the square set.

There was one drawback to this system; great care had to be taken to ensure each square set was held together very tightly to avoid catastrophic collapse. Careless construction at Homestake's Gopher Mine caused such a disaster with a cave-in described by the manager, Harry M. Gregg:

"We come into an old gopher chamber and a large mass of ore that was loose on acc[ount] of exposure to air fell and carried all the two upper floors with it on one end and all the timbers to [the] 4th floor on the other end. I think we have control of it now and hereafter I will see that the timbers are kept closer to the work."

Perhaps not close enough. There were other square set cave-ins at Homestake; one in 1883 swallowed up an entire blacksmith shop and in 1910, an accident below broke through a street in the town of Lead.

If you want to read more about this story and other early mining technologies you may want to check out Drills and Mills, Precious Metal Mining Methods of the Frontier West by Will Meyerriecks (2003). You can purchase this wonderful book at the Eureka Sentinel Museum (see note 1).

Let's see what's new in this morning's roundups...

Weekly Molybdenum Roundup



Molybdenum prices remain in a stable range with Western moly oxide up a buck to $15.50/lb and moving closer to European moly at $16.00/lb. The LME 3-month seller contracts is now $16.67/lb ($36,750/metric ton). The Report's mid-range price target for 2010 moly prices is $15.71/lb.

Western Moly Oxide (FeMo65) $15.50/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $16.00/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $34,050/metric ton $16.44/lb

3-Month (Buyer) $34,750/metric ton $15.76/lb
3-Month (Seller) $36,750/metric ton $16.67/lb

15-Month (Buyer) $34,750/metric ton $15.76/lb
15-Month (Seller)$36,750/metric ton $16.67/lb

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Eureka Miner's Index (EMI)

Below is a chart of the Eureka Miner's Index (EMI) with a low interest cap of 3% on 10-year Treasurys (LIRC) and adjustments for gold and silver prices (i.e., Au:Ag ratio). The EMI gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County (a larger more readable chart appears at the bottom of this blog page).


The Eureka Miner's Index(EMI) remains above-par at 135.92 just a bit south of Frday's close at 137.07 and a long way from the 6/7/10 low of 50.7. Today's number remains promising but we now need to pass resistance levels of 139.53 and then 151.54 to break the recent trend reversal to the downside. Remember an EMI greater than 100 is good times (or at least better times) for this sector.

Oil & Copper Correlations with Gold

Oil & copper correlations with gold give us insight into what may happen next for the metals & miners. As the Report showed in China to the Rescue?, one way to visualize these correlations with gold over time is to plot the "near-term" 3-month versus the "short-term" 1-month correlations (aka "rho") as shown below in these two graphs:




In this case of copper versus gold, we start out on 4/27/10 with both positively correlated (i.e. in the "+,+" quadrant). This is the day after this year's S&P 500 high and shortly after COMEX copper hit its high of $3.5840/lb (4/12/10). Unfortunately we soon descended into negative territory as the financial crisis in Europe worsened (blue line). Presently we remain in the "-/-" quadrant for both the short and near-term correlations - the magenta line and arrow show the most recent data and direction. To sustain optimism for copper prices we need a return trip to the "+,+" good lands via a trip through "+,-" country first.

Oil versus gold has a similar trajectory starting May 4th moving from the "+/+" to "-/-" quadrant. Oil, like copper, needs a breakout to the positive to end the bearish cycle of the past few months. Stay tuned.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Outlook Dashboard

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is above 25; metals & miners are still on shaky timber but bellwether Freeport-McMoRan (FCX) has returned to the low-$70s but stillbelow its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The YELLOW light is turned back on for Investor Confidence as the bond markets still signal trouble ahead

The GREEN light is turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.56 in early trading to $74.61 (October contract, most active); Gold is down 0.6 to $1237.3 (December contract, most active); Silver is down $0.009 to $19.065 (December contract, most active); Copper is up $0.0455 to $3.4075 (December contract, most active)

Western Molybdenum Oxide is $15.50; European Molybdenum Oxide is $16.00; LME moly 3-month seller's contract is $16.67, LME cash seller is $16.44

Stock Market Morning Update

The DOW is down 16.35 points to 10134.30; the S&P 500 is down 1.48 to 1063.11 Miners are mixed:

Barrick (ABX) $46.73 up 0.49%
Newmont (NEM) $60.08 up 0.22%
US Gold (UXG) $5.07 down 0.59%
General Moly (Eureka Moly, LLC) (GMO) $3.02 down 0.66%
Thompson Creek (TC) $8.66 up 0.35%
Freeport-McMoRan (FCX) $71.53 up 0.46% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are mixed (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $29.08 down 0.58% - global steel producer
POSCO (PKX) $103.93 up 0.72% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.02% to $1,374,311.04 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Note 1: Drills and Mills, Precious Metal Mining Methods of the Frontier West by Will Meyerriecks (2003). Eureka Opera House Director Wally Cuchine first introduced the ole Colonel to this fascinating book; you can purchase a copy at the gift shop of our Eureka Sentinel Museum. For folks new to our town, the museum is housed in the 1879 Eureka Sentinel Newspaper Building just behind the Chevron Station on South Bateman Street.

Headline photo: Homestake Mine in Lead, South Dakota. The headline and other old time photos can be seen at the Homestake Visitor Center on 160 West Main Street, Lead, South Dakota. Please pay them a visit on your next pass through.

Our thanks again to the faithful reader that made these wonderful photographs available to the Report.

Friday, August 27, 2010

When a Bad Number Seems Good - Metals & Miners Bounce


Morning Miners!

It is 5:57 AM. Scott Raine dropped off a fresh supply of his famous Triple-X TGIF coffee last night. He thought we'd need it in the break room this morning given all the news coming across the wire. There are at least two major market events before us and the Report will take a fun detour to more Homestake mining memories while we wait to gauge their effects on the the metals & miners. We started the Homestake series this Wednesday if you are just catching up (Ruby Hill & Homestake Mining Memories).

When a Bad Number Seems Good

Before we jump into the time machine, a quick recap of our first market event. Just minutes ago the Commerce Department issued a revision on their second quarter gross domestic product (GDP) estimate. The U.S. economy grew more sluggish than first reported - the GDP rose at a seasonally adjusted annual rate of 1.6%, less than the 2.4% growth initially estimated. Economists had expected growth to be revised lower to 1.3%. In the first quarter, the economy expanded 3.7%. A 1.6% GDP is a bad number for recovery growth but seems pretty good when you realize the "double-dip" crowd was praying for something a lot lower.

This news was worth a $6 pop for gold at the London spot exchange bouncing from $1235 to $1242/oz. Much more impressive than a 0.6% move in gold was the 3.7% jump in spot silver hopping from $18.94/oz to $19.12/oz. COMEX silver is presently trading at $19.10/oz. This Report began a silver watch Monday and so far so good (Good Time to Buy Silver or Sift Sand for Bean Gold?). Copper made a favorable move too, notching up 1.0% from $3.2910/lb to $3.325/lb. COMEX copper is trading at $3.3275. This is a decent response for all three metals and they are moving in the same direction improving their correlations (a bullish sign for metals). So much for a lousy number (so far).

Our next event is Federal Reserve Chairman Ben Bernanke's speech at the Kansas City Fed's annual symposium in Jackson Hole, Wyoming. Folks will be watching every word to sense a change in monetary policy and better determine the central bank's assessment of the economy. While we're waiting for all this drama, let's talk about old time miners making good use of a new fangled contraption...

Homestake Mining and the Rand Air Pneumatic Machine Drill

Today's headline photo shows two miners at the Homestake Gold Mine in Lead, South Dakota, using a Rand air pneumatic machine drill in the early 1900s. 250 of these state-of-the-art drills were in use at the Homestake mine which first began using machine drills in 1883. The Rand was much more effective than early models with reduced weight, improved drilling efficiency and better dust control. Ingersoll-Sergeant merged with Rand Drill in 1905 to form what we recognize today as Ingersoll-Rand.

If you are interested in the history of machine drills and other early mining technologies you may want to check out Drills and Mills, Precious Metal Mining Methods of the Frontier West by Will Meyerriecks (2003). Eureka Opera House Director Wally Cuchine first introduced the ole Colonel to this wonderful book; you can purchase a copy at the gift shop of our Eureka Sentinel Museum. For folks new to our town, the museum is housed in the 1879 Eureka Sentinel Newspaper Building just behind the Chevron Station on South Bateman Street.

Uncle Ben Has Spoken

Chairman Bernanke has just concluded his Jackson Hole speech and all is well that ends well. As he began speaking the S&P dropped to a scary 1,041 but when he concluded the market bounced back over 1,050 and the metals & miners are mostly smiling. Uncle Ben said that he is prepared to do what it takes to support an economic recovery that has been losing steam. As reported by the Wall Street Journal:

"In particular, the [Federal Open Market] Committee is prepared to provide additional monetary accomodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly..." (WSJ, 8/27/2010)

So it goes. Have a terrific weekend buckaroos.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) remains above-par at 119.29 just a sliver under yesterday's 119.44 and a long way from the 6/7/10 low of 50.7. Today's number is promising but we now need to pass resistance levels of 139.53 and then 151.54 to break the recent trend reversal to the downside. Remember an EMI greater than 100 is good times (or at least better times) for this sector.

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is above 25; metals & miners are still on shaky timber but bellwether Freeport-McMoRan (FCX) has returned to the high-$60s but below its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The YELLOW light is turned back on for Investor Confidence as the bond markets still signal trouble ahead

The GREEN light is turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $0.02 in early trading to $73.38 (October contract, most active); Gold is up $3.5 to $1241.2 (December contract, most active); Silver is up $0.118 to $19.100 (September contract, most active); Copper is up $0.0230 to $3.3275 (September contract, most active)

Western Molybdenum Oxide is $14.75; European Molybdenum Oxide is $16.00; LME moly 3-month seller's contract is $16.67, LME cash seller is $16.42

The DOW is up 53.43 points to 10039.24; the S&P 500 is up 4.76 to 1051.98 Everyone except the big golds are enjoying Uncle Ben's cooked rice:

Barrick (ABX) $45.80 down 0.44%
Newmont (NEM) $58.74 down 1.18%
US Gold (UXG) $4.92 up 1.23%
General Moly (Eureka Moly, LLC) (GMO) $2.97 up 2.41%
Thompson Creek (TC) $8.47 unchanged
Freeport-McMoRan (FCX) $68.66 up 2.31% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are pouring gravy on their rice, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $28.61 up 1.42% - global steel producer
POSCO (PKX) $101.41 up 0.03% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.64% to $1,345,163.52 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photo: Homestake Mine in Lead, South Dakota. The headline and other old time photos can be seen at the Homestake Visitor Center on 160 West Main Street, Lead, South Dakota. Please pay them a visit on your next pass through.

Our thanks again to the faithful reader that made these wonderful photographs available to the Report.

Thursday, August 26, 2010

Silver Breaks $19, Euro-Moly Moves to $16 - Animal Spirits?



Þūnresdæg

Morning Miners!

It is 6:00 AM sharp. Have a thunderous cup of Thor's lightening-tempered java. I'm still trying to teach our favorite Norseman that electricity can flow down wires as easily as clouds. We're making progress - no more fires in the parking lot to heat the Thor's Day coffee. The ole Colonel still has to plug in the pot but Thor has discovered how to turn on the T.V. His favorite show? The Weather Report.

Weekly Jobless-Claims Surprise to the Upside

Weather may improve in the markets today with a positive surprise in the week's jobless-claims numbers. The Labor Department reports that initial unemployment claims declined by 31,000 to 473,000 in the week ending Aug. 21. Economists surveyed by Dow Jones Newswires had predicted filings would decline by 10,000. That's promising but the big boy Labor Report for the month of July will come out next Friday before the Labor Day weekend. The GDP report tomorrow, followed by the monthly labor report and well-heeled investors returning after Labor Day from their August vacation in the Hamptons will all be market moving events buckaroos. Stay tuned.

Silver on a Tear

There is nothing more tiresome than an "I-told-you-so." The ole Colonel will take a little credit, however, for suggesting it may be time to buy silver earlier this week (Good Time to Buy Silver or Sift Sand for Bean Gold?). COMEX silver dipped to an intraday low of $17.735/oz on Tuesday; early this morning COMEX silver peaked to $19.165/oz before falling back some to $19.020/oz. The move from low to high was a respectable 8.1% for a bounce in gold of only 2.7% for the same period.

The gold-silver ratio (Au:Ag ratio) is presently 64.99 down from 68.21 Monday. At these levels a decrease in Au:Ag signals that fear is receding from the marketplace (at least for today).

A "Liquidity Trap" Could Hurt Metals & Miners


I listened to a very interesting interview on CNBC news this morning before Thor turned on the Weather Channel. Mohamed El-Erian who runs PIMCO, the world's largest bond trading firm, gave an update on his big picture. You may remember that El-Erian coined the term "new normal" last year to describe a world going forward with lower economic expectations and slower growth prospects. Today he expanded on what he describes now as a "liquidity trap" for the Federal Reserve. With the Fed's target rate near zero, Uncle Ben has fewer remedies in his medicine bag to revive a muddling economy. Low interest rates typically move investors to riskier assets such as commodities as fear recedes from the marketplace. The Fed would also like banks to lend more and for companies to invest their piles of rainy day cash. If everyone stops taking these risks a liquidity trap occurs with the threat of deflation down the road. According to Mr. El-Erian the only thing that will save us will be "animal spirits" returning to the markets or a change in monetary policy (he didn't say what that change should be). If this scenario is correct a "liquidity trap" could be potentially devastating for the metals & miners sector. With policy changes doubtful in the near term, I guess optimists like me need to pray to the animal spirits. Looking at this morning's markets it appears the animals are back in charge (at least for a day). Copper is up; Moly futures on the London Metal Exhange (LME) and European Moly Oxide are all above $16.00/lb - that's a Colonel Yee-ha!

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) rebounded to an above-par 119.44; a big bounce from yesterday's sub-par 98.64 and a long way from the 6/7/10 low of 50.7. Today's number is promising but we now need to break resistance levels of 139.53 and then 151.54 to break the recent trend reversal to the downside. Remember an EMI greater than 100 is good times (or at least better times) for this sector.

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is above 25; metals & miners are still on shaky timber but bellwether Freeport-McMoRan (FCX) has returned to the high-$60s but below its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The YELLOW light is turned back on for Investor Confidence as the bond markets signal trouble ahead

The GREEN light is turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $0.26 in early trading to $72.78 (October contract, most active); Gold is down $3.8 to $1236.10 (December contract, most active); Silver is down $0.006 to $19.020 (September contract, most active); Copper is up $0.0685 to $3.2795 (September contract, most active)

Western Molybdenum Oxide is $14.75; European Molybdenum Oxide is $16.00; LME moly 3-month seller's contract is $16.67, LME cash seller is $16.44

The DOW is up 23.61 points to 10083.67; the S&P 500 is up 4.55 to 1059.88 The miners are up:

Barrick (ABX) $45.76 up 1.40%
Newmont (NEM) $59.11 up 0.63%
US Gold (UXG) $4.94 up 1.65%
General Moly (Eureka Moly, LLC) (GMO) $3.05 up 2.35%
Thompson Creek (TC) $8.56 down 1.18%
Freeport-McMoRan (FCX) $68.16 up 2.25% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are up, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $28.62 up 0.85% - global steel producer
POSCO (PKX) $102.43 up 0.44% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 1.12% to $1,356,149.18 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photo: Homestake Mine in Lead, South Dakota. The headline and other old time photos can be seen at the Homestake Visitor Center on 160 West Main Street, Lead, South Dakota. Please pay them a visit on your next pass through.

Our thanks again to the faithful reader that made these wonderful photographs available to the Report.

Wednesday, August 25, 2010

Ruby Hill & Homestake Mining Memories



Wōdnesdæg

Morning Miners!

It is 5:52 AM. Ruby T dropped off Old Miner Woden early this morning on her haul back from Bald Mountain. He and I are having the best time looking at some old time photos of Homestake Mining that a good friend and reader of the Report slipped under the break room door last night. Pour yourself a cup and join us.

My memories of Eureka, Nevada, are organized around who did the big local mining of the day. Mariana and I first passed through this wonderful town after the nearby Windfall Mine had closed but we thoroughly enjoyed the rough and tumble days of the Atlas Gold Bar Mine in the late 1980s and early-1990s (Atlas Mine Memories, 11/2/09). Today we have Barrick's Ruby Hill Mine and tomorrow promises to be a very long stretch with General Moly's Mt. Hope molybdenum project which begins mine construction next summer.

Homestake Mining Comes to Eureka

Sandwiched between Atlas and Barrick was another memorable period when Homestake Mining reopened the Ruby Hill Mine in the late 1990s. They employed a lot of local folks and had their first gold pour November 6, 1997. In those days gold prices were stuck in a range between $300 to $400/oz; at the time of the pour gold was trading mid-range at roughly $350/oz. To put this in some perspective here is a 15-year chart of gold prices - we've come a long way, pardner:



I found a news story from those days that you may find interesting:

Homestake's Ruby Hill Mine Announces its Initial Gold Pour (Business Wire, 11/10/1997)

Jack E. Thompson, President and CEO of Homestake in those days said, "Ruby Hill will be Homestake's lowest cost mine and will make an important contribution to the Company's bottom line even at current gold prices." Ruby Hill showed enough promise that the operation was taken over by Barrick Gold Corp. in 2001. At that time, Ruby Hill produced 134,747oz of gold, but was closed during 2002 following the exhaustion of mineable reserves. Operations at the mine restarted in 2003 with a decision to reopen and explore the East Archimedes gold ore body, found below the original open pit towards the east. Last year Barrick poured its millionth ounce and Ruby Hill is still going strong.

Homestake Mining Company's Colorful 126-year History



Homestake Mining merged with Barrick Gold and their big Homestake Gold Mine in Lead, South Dakota, was closed in 2002 - at that time it was the oldest, largest and deepest mine in the Western Hemisphere, reaching more than 8000 feet below the town of Lead. Today's photographs are from the early heydays of Homestake, many of which are on display at the Visitor's Center in Lead:

Homestake Visitor Center

They depict not only the miners life and working conditions of those days but also a colorful company history. Mining magnate, George Hearst, formed Homestake Mining Company toward the end of the famous Black Hills gold rush. Please visit this link on your lunch break and you can catch up on the 126-year history of this historic mining company that also made an important contribution to Eureka's history and economy. The Report will feature more of these photographs over the next several weeks and gives a hats off to our friend and contributor that made this possible.

Homestake Firemen in Leather Face Masks



Ellison Hoist Room



Horses Were Important to Early Mining at All Levels




Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is back in sub-par country at 96.13; a further step down from yesterday's 98.64 but still a big improvement from the 6/7/10 low of 50.7. Today's number confirms a trend reversal to the downside, a bearish sign for our metals & miners. Remember an EMI greater than 100 is good times (or at least better times) for this sector.

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is above 25; metals & miners are return to shaky timber with bellwether Freeport-McMoRan (FCX) falling back to the mid-$60s well below its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The YELLOW light is turned back on for Investor Confidence as the bond markets signal trouble ahead

The GREEN light is turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is down $1.28 in early trading to $71.50 (October contract, most active); Gold is up $8.8 to $1241.0 (December contract, most active); Silver is up $0.392 to $18.770 (September contract, most active); Copper is down $0.0390 to $3.2020 (September contract, most active)

Western Molybdenum Oxide is $14.75; European Molybdenum Oxide is $15.75; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.10

The DOW is down 54.72 points to 9.985.73; the S&P 500 is down 7.24 to 1044.63 The miners are mixed:

Barrick (ABX) $44.00 up 0.50%
Newmont (NEM) $57.32 up 0.35%
US Gold (UXG) $4.79 up 0.84%
General Moly (Eureka Moly, LLC) (GMO) $2.87 down 2.71%
Thompson Creek (TC) $8.14 down 1.21%
Freeport-McMoRan (FCX) $66.26 down 1.18% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are down too, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $27.85 down 2.62% - global steel producer
POSCO (PKX) $100.95 down 2.04% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.78% to $1,315,774.64 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photo: Homestake Mine in Lead, South Dakota. The headline and story photos can be seen at the Homestake Visitor Center on 160 West Main Street, Lead, South Dakota. Please pay them a visit on your next pass through.

Tuesday, August 24, 2010

Metals & Miners Stumble - LME Boasts Cobalt & Molybdenum



Morning Miners!

It is 5:23 AM. Ruby Tuesday rolled into town with an oversize yesterday afternoon and bailed out Old Miner Woden. Give them a holler if you see them heading east on HWY 50, they'll be pouring coal at sunrise. Grab a cup and let's see what's happening to our metallic compadres. Gold, silver and copper are all down in the spot markets on continuing pessimism about the global recovery. As the Report mentioned yesterday (Good Time to Buy Silver or Sift Sand for Bean Gold?), silver may be interesting in the $17/oz range if you share my optimism for the future; if not, keep stocking your cave in Double-Dip Canyon. This early morning Reuters article thinks copper may be headed back to sub-$3/lb pasture:

METALS-Copper at 1-wk low, economic, demand outlook gloomy (Maytaal Angel, Reuters, 8/24/2010)

In other news the London Metals Exchange (LME) is boasting about their new cobalt in molybdenum futures market as reported by Hedgeweek::

LME reports encouraging start to cobalt and molybdenum trading (Hedgeweek, 5/23/2010)

This Report has been covering the minor metals launch since February this year when Miss Moly packed her bags for her London debut (Miss Moly Flies to London). We are in the very early stages of a futures market with fairly thin trading for either metal. This should improve as more moly miners become involved and more speculative money is attracted to these futures contracts. Both 3-month and 15-month moly contracts have shown amazing resilience though the worst of the commodity downturn in May-June, trading in a range of $30,000 to $40,000/metric ton ($13.61/lb to $18.14/lb) since March of this year. Hats off to Miss Moly.

The broader markets are just opening up and you may have to pass on silver today. Looks like someone else thought it is cheap at these levels, look at this bounce on the London exchange:



Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) nose-dived to sub-par country at 98.64, a big drop from yesterday's 129.32 but a big improvement from the 6/7/10 low of 50.7. Today's number has broken the lower trend line (124.42), a bearish sign. Remember an EMI greater than 100 is good times (or at least better times) for metals & miners.

4-WD is ON - rough roads in the marketplace; The VIX or "fear index" is above 25; metals & miners are returning to shakier timber with bellwether Freeport-McMoRan (FCX) falling back to the high-$60s well below its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The YELLOW light is turned back on for Investor Confidence as the bond markets signal trouble ahead

The GREEN light is turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is down $1.28 in early trading to $71.82 (October contract, most active); Gold is down $12.7 to $1215.8 (December contract, most active); Silver is down $0.169 to $17.825 (September contract, most active); Copper is down $0.0740 to $3.2175 (September contract, most active)

Western Molybdenum Oxide is $14.75; European Molybdenum Oxide is $15.75; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.08

The DOW is down 120.18 points to 10,054.23; the S&P 500 is down 14.13 to 1053.23. The miners are down big time:

Barrick (ABX) $43.28 down 1.88%
Newmont (NEM) $56.79 down 1.37%
US Gold (UXG) $4.79 down 0.83%
General Moly (Eureka Moly, LLC) (GMO) $2.97 down 1.66%
Thompson Creek (TC) $8.74 down 2.56%
Freeport-McMoRan (FCX) $67.79 down 3.65% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are down too, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $28.62 down 2.35% - global steel producer
POSCO (PKX) $102.61 down 0.44% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.64% to $1,326,977.19 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph of Mt. Hope by Mariana Titus

Monday, August 23, 2010

Good Time to Buy Silver or Sift Sand for Bean Gold?


Morning Miners!

It is 5:54 AM. Let me pour you a cup of Monday motivation and let's get to work. It looks like today may prove to be a study in contrasts. There are at least two camps of opinion on where we're headed next. In the past, these settlements have been at different points on the river of global recovery; now it appears they are in different canyons. If you hang out in the camp of stock markets, life isn't great but there is still water in the sluice and a promise of more glitter in the pan when the river rises. Over the ridge in double-dip canyon, recovery creek has slowed to a trickle and those campers are hunkering down for a drought, sifting through dry sand for "bean" gold (note 1).

There are a lot of bond traders in the dry camp so let's start with a look at 10-year Treasury yields. This morning we are at levels comparable to the worst day in recent memory for the metal & miners. In December 2008, folks were fearing a run on the banks, copper was trading at $1.30/lb and our bellwether miner Freeport-McMoran hit rock bottom:

10-yr Treasury 2.657% - 12/5/2008: Freeport-McMoran bottom ($16.8, $15.7 intraday)
10-yr Treasury 2.632% - 8/23/2010: This morning

To broaden this comparison let's throw in the worst day this year for the metals & miners which occurred June 7th during the spring commodity massacre:

10-yr Treasury 3.146% - 6/7/2010

Bond yields move inversely to bond price, so low yields indicate that many investors are piling into the Treasury safe haven now as they did during the worst days of the credit crisis.

In the camp with running water, the miners are whistling a much happier tune. This Report uses the S&P 500 Volatility Index (VIX) to gauge fear in the stock market. Here is the VIX and Eureka Miner's Index (EMI) for our three example days (VIX greater than 25 indicates fear in the marketplace, an EMI greater than 100 is bullish for miners):

12/5/2008 VIX = 59.9 EMI = 1.15
6/7/2010 VIX= 36.6 EMI = 50.7
8/23/2010 (this morning) VIX = 24.7 EMI = 129.3

Today as we teeter below the threshold of fear at 24.7 and witness a healthy above-par 129.3 for the EMI, who has a care in the world?

Another gauge of market fear is the ratio of gold to silver prices. This morning COMEX gold is trading at $1229.4/oz and silver at $17.960/oz. The gold-silver ratio (or Au:Ag) is therefore 68.4 (i.e. $1229.4/$17.960). This is comparable to levels seen last June but still lower than in 12/08 (an Au:Ag in the range of 50-56 is typical in less fearful, non-recessionary times):

12/5/2008 Au:Ag = 79.3
6/7/2010 Au:Ag = 68.3
8/23/2010 (this morning) Au:Ag = 68.4

The present Au:Ag ratio suggests investors are still running to gold as a safe haven also, at least relative to silver prices. Let's finish our comparisons by looking at bellwether miner Freeport McMoran and copper prices again for these three dates:

12/5/2008 FCX $16.8 COMEX copper $1.30/lb
6/7/2010 FCX $58.66 up 249% COMEX copper $2.7660/lb up 113%
8/23/2010 FCX $72.02 up 329% COMEX copper $3.2830/lb up 153%

Who's right and who's wrong? If you are in the optimist camp you may believe gold will trend higher with metal prices and the silver-gold ratio will fall as fear recedes from the marketplace. The happy campers may think about throwing a little silver in their saddle bags for safe keeping at these levels.

The worst pessimists in the dry camp see disinflation (i.e. decreasing rate-of-inflation) leading to deflation followed eventual hyper-inflation. In this scenario gold and silver prices will fall or move sideways for some time then rocket to the moon as paper money is used to start campfires. If you are one of these folks, you may want to wait for Au:Ag ratios to hit the 70-80s before loading up on silver to add to your growing pile of bean gold.

The ole Colonel is forever an optimist and it's more fun to sit by a running creek with a band of merry fools (or wise men, time will tell). The good news is that precious metals are always a good thing to have around no matter which camp you're in. I'd personally wait for Au:AG to rise a little more before thinking about buying more silver at these prices...but we're getting closer buckaroos.

Let's see how our Miss Moly fared last week:

Weekly Molybdenum Roundup



Molybdenum prices remain in a stable range with Western moly oxide still at $14.75/lb a dollar lower than European moly. The LME 3-month and 15-month seller contracts are now $16.33/lb ($36,000/metric ton). The Report's mid-range price target for 2010 moly prices is $15.71/lb.

Western Moly Oxide (FeMo65) $14.75/lb (the price tracked by Base Metals on the General Moly Website)

Moly Oxide, Europe (Mo Drummed Molydbic Oxide EU) $15.75/lb (the price reported in the Metals Bulletin)

LME Futures Contracts

LME cash seller is at $34,050/metric ton $16.06/lb

3-Month (Buyer) $34,000/metric ton $15.42/lb
3-Month (Seller) $36,000/metric ton $16.33/lb

15-Month (Buyer) $34,000/metric ton $15.42/lb
15-Month (Seller)$36,000/metric ton $16.33/lb

Here is a chart of the LME 3-month contract (seller) from the February launch to the present:



Eureka Miner's Index (EMI)

Below is a chart of the Eureka Miner's Index (EMI) with a low interest cap of 3% on 10-year Treasurys (LIRC) and adjustments for gold and silver prices (i.e., Au:Ag ratio). The EMI gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County (a larger more readable chart appears at the bottom of this blog page).



The Eureka Miner's Index is above-par at 129.32, a bit up from Friday's 123.77 close and a big improvement from the 6/7/10 low of 50.7. Importantly, the high and low trends (dotted lines) remain positive since the EMI high on 6/25. Remember an EMI greater than 100 is good times (or at least better times) for metals & miners.

Enough talk, let's walk the walk:

4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is just below 25; metals & miners are on firmer timber with bellwether Freeport-McMoRan (FCX) in the low-$70s below its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The YELLOW light is turned back on for Investor Confidence as the bond markets signal trouble ahead

The GREEN light is turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $0.10 in early trading to $73.92 (October contract, most active); Gold is up $0.6 to $1229.4 (December contract, most active); Silver is down $0.031 to $17.960 (September contract, most active); Copper is down $0.0080 to $3.2830 (September contract, most active)

Western Molybdenum Oxide is $14.75; European Molybdenum Oxide is $15.75; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.06

The DOW is up 75.00 points to 10,288.62; the S&P 500 is down 8.20 to 1079.89. The miners are mixed:

Barrick (ABX) $44.49 down 0.65%
Newmont (NEM) $57.97 down 0.09%
US Gold (UXG) $4.95 up 0.81%
General Moly (Eureka Moly, LLC) (GMO) $3.17 up 1.60%
Thompson Creek (TC) $9.04 up 1.35%
Freeport-McMoRan (FCX) $72.02 up 0.91% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are mixed, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $30.05 up 0.67% - global steel producer
POSCO (PKX) $105.89 down 0.30% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.49% to $1,377,395.15 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Note 1: During the Great Depression many poor miners sifted dry sand for placer gold in hopes that a day's find would be enough to buy a can of beans.

Headline photograph by Mariana Titus

Friday, August 20, 2010

A Great Week for Eureka Moly LLC (GMO)


Morning Miners!

It is 5:59 AM. Have a hot cup of Raine's TGIF brew and let's reflect a bit on the last few days. It has been a great week for Eureka Moly LLC, subsidiary of General Moly (GMO), as many things have fallen into place to bring us closer to the start of Mt. Hope molybdenum mine construction next summer. Here is a recap of events and links in case you've been away:

Thursday (8/12) - The Eureka Commissioners met with the Nevada Rural Housing Authority (NRHA) to discuss plans and financing for the Eureka Canyon housing development. The new housing will relieve present shortages as the Mt. Hope project starts to roll (Eureka Housing Update)

Wednesday (8/18) - General Moly hosted a breakfast for community business leaders at the Owl Club (picture below, Eureka Housing Update). General Moly consultant Elaine Barkdull-Spencer told the Report, "As a result of the one-on-one interviews, a better than expected turnout of 34 business representatives attended the inaugural Eureka Business Breakfast Buffet that was hosted by General Moly and held on Wednesday, August 18, 2010 at the Owl Restaurant in Eureka. The focus of the meeting was on the Mount Hope project and its impacts on the business community. The group has agreed to meet the third Wednesday of each month at 7 a.m."

Thursday (8/19) - General Moly issued two press releases announcing the completion of the Preliminary Draft Environment Impact Statement (PDEIS) and a breakthrough on their water rights issue (General Moly (GMO) Makes Key Milestone):

GENERAL MOLY ANNOUNCES COMPLETION OF PRELIMINARY DRAFT ENVIRONMENTAL IMPACT STATEMENT (Press Release, 6:00 a.m. PDT, 8/19/2010)

GENERAL MOLY ANNOUNCES CREATION OF AGRICULTURAL SUSTAINABILITY TRUST IN DIAMOND VALLEY (Press Release, 1:40 p.m. PDT, 8/19/2010)


It is always a treat to read Adella Harding, Elko Daily Free Press & Mining Quarterly Editor, report on our local events. Here are her articles on this week's happenings:

Preliminary draft out on Mt. Hope (Adella Harding, Elko Daily Free Press, 8/19/201)

Eureka Moly, growers sign agreement (Adella Harding, Elko Daily Free Press, 8/19/201)

That should be enough reading material for your lunch break and maybe the weekend. As the markets opened today, the ole Colonel tossed a few more shares of General Moly in the buckboard. I paid $3.00/share which is a thin flat washer below the GMO 200-day moving average ($3.02/share), not a bad price for a mining company that may bring jobs and revenue to Eureka County for the next forty years.

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 113.58, a noticeable drop from yesterday's 139.53 but a big improvement from the 6/7/10 low of 50.7. Importantly, the high and low trends remain positive since the EMI high on 6/25 but today's number just broke the lower trend line (120.67). Remember an EMI greater than 100 is good times (or at least better times) for metals & miners.

4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is above 25; metals & miners are on firmer timber with bellwether Freeport-McMoRan (FCX) in the low-$70s below its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The YELLOW light is turned back on for Investor Confidence as the bond markets signal trouble ahead

The GREEN light is turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is down $0.61 in early trading to $74.16 (October contract, most active); Gold is down $7.0 to $1228.4 (December contract, most active); Silver is down $0.222 to $18.105 (September contract, most active); Copper is down $0.0410 to $3.2775 (September contract, most active)

Western Molybdenum Oxide is $14.75; European Molybdenum Oxide is $15.75; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.06

The DOW is down 70.99 points to 10,200.22; the S&P 500 is down 6.10 to 1069.53. The miners are down:

Barrick (ABX) $44.12 down 1.69%
Newmont (NEM) $57.47 down 1.66%
US Gold (UXG) $4.85 down 2.79%
General Moly (Eureka Moly, LLC) (GMO) $3.01 down 0.66%
Thompson Creek (TC) $8.74 down 2.56%
Freeport-McMoRan (FCX) $71.25 down 1.17% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are down too, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $29.62 down 1.99% - global steel producer
POSCO (PKX) $105.21 down 1.44% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.50% to $1,355,489.68 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph of Mt. Hope by Mariana Titus

Eureka Business Breakfast Buffet photograph
courtesy of Eureka Moly LLC

Thursday, August 19, 2010

General Moly (GMO) Makes Key Milestone & US Gold (UXG) Shines


BREAKING NEWS FOR GENERAL MOLY (2:00 p.m. PDT): A second General Moly (GMO) press release has just crossed the wires which bodes well for resolution of the water rights issue:
GENERAL MOLY ANNOUNCES CREATION OF AGRICULTURAL SUSTAINABILITY TRUST IN DIAMOND VALLEY (Press Release, 1:40 p.m., 8/19/2010)
MARKET UPDATE (9:51 a.m. PDT): Mining Stocks opened mostly up on an otherwise down day for the broader markets. After 7:00 a.m. (PDT), the miners were pulled into the red with other equities as a worse than expected jobless claims report was further digested by investors. The DOW is down 165 points at 9:51 a.m.(PDT), bellwether miner Freeport-McMoRan is down 1.35%.

Þūnresdæg

Morning Miners!

It is 6:03 AM. The coffee is not ready yet but I've got a good excuse. Sit down for a tall tale while we wait for the light to come on. I got a call from a Deputy Sheriff just before midnight, "Colonel, if you want this week to have a Thursday you'd better get down here in hurry and bail out your favorite Norseman!" Nuts, what has Thor done now? I wish he'd concentrate on chucking a rare summer thunderbolt over Diamond Valley and stop all of his durn foolishness.

I jumped into my Carhartts and headed downhill to the station to find both Old Miner Woden and Thor in la pinta. Apparently after drinking quite a few flagons of mead at the Keyhole, these two scalawags got into quite a scrap. The Deputy informed me that the old timers were fighting over which day of the week was more important, Wednesday or Thursday. I knew if I didn't act quickly before the strike of midnight there wouldn't even be a Thursday this week. Now, some of you may think that would be just fine because we'd be closer to the weekend. But think of this: if we were one day ahead of everyone, you'd have to drive in reverse on your next trip to Reno! I don't think most folks out here would appreciate that or being in the same time zone as Shanghai, China. I bailed Thor out but Old Miner Woden wanted to stay at the County Hotel until Ruby Tuesday comes back through - three hots and a cot beats camping out at Lone Mountain. Anyway, the ole Colonel did his best to bring you another morning, "Happy Thor's Day miners!"

General Moly Makes Key Milestone

There the coffee light is on, the broader markets are open and I'll pour you a cup. Looks like the S&P 500 has got the blues over another sour jobless claims report but the miners & metals are smiling. There's more good news for General Moly too. They just announced this morning that the Bureau of Land Management's (BLM) contractor has completed the Preliminary Draft Environmental Impact Statement (PDEIS):

GENERAL MOLY ANNOUNCES COMPLETION OF PRELIMINARY DRAFT ENVIRONMENTAL IMPACT STATEMENT (Press Release, 8/19/2010)

Bruce D. Hansen, Chief Executive Officer, said,

"This is a significant milestone for our project. It marks the completion of four years of studying the environmental, social, and cultural impacts of the Mt. Hope project and signifies that the BLM is comfortable that the completed baseline reports form the basis for a comprehensive and defensible document. We will continue work with the BLM and the other agencies involved to drive the permitting process in a prudent but expeditious manner."

This is a key milestone before the anticipated publication of the DEIS later this year and receipt of the Record of Decision (ROD) by mid-2011.

General Moly hosted a business community meeting Wednesday morning at the Owl Club and had about 25 business leaders from the Eureka Community there to learn more about the Mt. Hope project. This is a continuing effort to involve the community in the pre-mine construction phase to avoid the pitfalls of other mining projects of the past. The Atlas Gold Bar Mine experience comes to mind in the 1980s and early 1990s, speaking of which...

Here Comes Merger Madness

One significant boost to the markets in a backdrop of muddling economic recovery has been the recent spat of attempted mergers. On Monday we covered Australian giant BHP Billiton's offer to takeover Canadian Potash (Copper & Gold Back in the Swing). Yesterday, there was speculation about a reported $80/share offer price from Luxembourg-based ArcelorMittal (MT) for Pittsburgh-based USS (X). ArcelorMittal is the world's largest steel producer and is an investor in General Moly.

There is a Mineweb article this morning on possible junior gold miner mergers in the winds:

Junior gold stocks ripe for takeovers now? (Mineweb, 8/19/2010)

I started thinking about U.S. Gold (UXG) and it seems reasonable to me that they may soon be in Barrick's (ABX) cross-hairs. They own a large portion of the old Atlas Gold Bar Mine and I believe Barrick and possibly a few others own the old mill and adjacent claims. With domestic gold production falling, why wouldn't Barrick be interested in consolidating more properties on the Eureka-Carlin trend?


The ole Colonel has no more information on this than a good hunch. I just threw a few more shares of UXG in the buckboard this morning as a local bet on merger madness. We added UXG to the Eureka Miner's Grubstake Portfolio earlier this year at $2.66/share. This morning UXG is trading at $5.18 up 94.7% from January's purchase - not too bad buckaroos.

Stay tuned...

Daily Market Roundup

Enough talk, let's walk the walk:

The Eureka Miner's Index(EMI) is above-par at 139.53, a bit up from yesterday's 133.24 and a big improvement from the 6/7/10 low of 50.7. Importantly, the high and low trends remain positive since the EMI high on 6/25. Remember an EMI greater than 100 is good times (or at least better times) for metals & miners.

4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners are on firmer timber with bellwether Freeport-McMoRan (FCX) in the low-$70s and closing on its 200-day average of $75.3 (our new warning level, 8/05 update); 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.

The YELLOW light is turned back on for Commodity Reflation. Although copper is trading above $3/lb, the 10-yr T-Note is solidly below 3.00%

The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation/Deflation Watch as the Federal Reserves resumes buying back Treasurys and the 10-yr T-Note remains below 3.00%

The YELLOW light is turned back on for Investor Confidence as the bond markets signal trouble ahead

The GREEN light is turned on our Fuel Gauge with oil below $80

A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $0.01 in early trading to $75.79 (October contract, most active); Gold is up $4.7 to $1235.8 (December contract, most active); Silver is up $0.141 to $18.540 (September contract, most active); Copper is up $0.0130 to $3.3625 (September contract, most active)

Western Molybdenum Oxide is $14.75; European Molybdenum Oxide is $15.55; LME moly 3-month seller's contract is $16.33, LME cash seller is $16.06

The DOW is down 74.32 points to 10,341.22; the S&P 500 is down 8.40 to 1085.76. The miners are up except the molys:

Barrick (ABX) $45.68 up 0.93%
Newmont (NEM) $60.02 up 0.89%
US Gold (UXG) $5.18 up 1.17%
General Moly (Eureka Moly, LLC) (GMO) $3.20 unchanged
Thompson Creek (TC) $9.10 down 0.87%
Freeport-McMoRan (FCX) $73.86 up 0.87% (a bellwether mining stock spanning copper, gold & molybdenum)

The Steels are up too, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $31.48 up 0.70% - global steel producer
POSCO (PKX) $108.49 up 3.12% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.70% to $1,410,395.67 (what's this?).

Cheers,

Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus